A smart beta exchange traded fund, the Schwab Fundamental U.S. Small Company Index ETF (
FNDA Quick Quote FNDA - Free Report) debuted on 08/13/2013, and offers broad exposure to the Style Box - Small Cap Value category of the market. What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $6.59 billion, this makes it one of the largest ETFs in the Style Box - Small Cap Value. FNDA is managed by Charles Schwab. FNDA, before fees and expenses, seeks to match the performance of the Russell RAFI US Small Co. Index.
The Russell RAFI US Small Company Index measures the performance of the small company size segment by fundamental overall company scores.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.25%.
The fund has a 12-month trailing dividend yield of 1.52%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FNDA, it has heaviest allocation in the Industrials sector --about 21.10% of the portfolio --while Consumer Discretionary and Financials round out the top three.
Looking at individual holdings, Super Micro Computer Inc (
SMCI Quick Quote SMCI - Free Report) accounts for about 0.63% of total assets, followed by Diversified Healthcare Trust ( DHC Quick Quote DHC - Free Report) and Visteon Corp ( VC Quick Quote VC - Free Report) .
FNDA's top 10 holdings account for about 3.19% of its total assets under management.
Performance and Risk
The ETF has added about 7.76% so far this year and was up about 1.38% in the last one year (as of 08/25/2023). In the past 52-week period, it has traded between $42.52 and $53.63.
The fund has a beta of 1.20 and standard deviation of 22.58% for the trailing three-year period, which makes FNDA a medium risk choice in this particular space. With about 1001 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Small Company Index ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Value ETF (
IWN Quick Quote IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard Small-Cap Value ETF ( VBR Quick Quote VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $10.97 billion in assets, Vanguard Small-Cap Value ETF has $24.80 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit
Zacks ETF Center.